Back in 2004, I was getting whipped in the market even though I had the best indicators, so I used to go into the market looking at the setups and then immediately they would reverse back and I would be getting stopped out.
I was utterly depressed at my methods and was banging my head against the walls as trade after trade kept on losing. At that point in time, I had pleasure of meeting Linda Raschke in Chicago and amazing she is, she readily lent her experience to me.
She in her short advice, asked me look at market sentiment before putting my money in. She advised me to look at strategies that work in bearish markets and choppy markets. So I asked her what she meant by market sentiments, I told her that market was choppy doing what its suppose to do. She advised me to look at what institutions are thinking. In her words, "What are elephants doing? " " What are big boys at Fidelity doing?" She asked me look for that myself.
So I started looking for and came across VIX and VXN as fear indices. So I started doing some research on how to use this to my benefit. So I studied this in little more detail and saw the usual range is 15 to 45. I was also using my Moving averages chart and I found amazingly that when VIX crossed 150 day MA, the market went into correction.
Since then I have been collecting that data and plotting 150day MA by myself to get my perspective on the market. This thing has saved me a whole lot of money.
The first wave of 2008, I completely survived but when VIX was at 45-50 level, I started treading into the market to get my head handed back to me. So I learnt the lesson, that one should not tread the shark infested water till VIX comes down below 150 day MA.
Recently, this indicator is having some issues. I think this is due to propagation of weekly options. Since VIX does not account for puts and calls in weeklies, hence its not giving the early warnings. However I believe there will be some adjustments made to this Index. I will keep on monitoring this signal as it might be little late but will still indicate what is going on.
Next article would be how I use Put call ratio in conjunction with VIX to understand the situations
I was utterly depressed at my methods and was banging my head against the walls as trade after trade kept on losing. At that point in time, I had pleasure of meeting Linda Raschke in Chicago and amazing she is, she readily lent her experience to me.
She in her short advice, asked me look at market sentiment before putting my money in. She advised me to look at strategies that work in bearish markets and choppy markets. So I asked her what she meant by market sentiments, I told her that market was choppy doing what its suppose to do. She advised me to look at what institutions are thinking. In her words, "What are elephants doing? " " What are big boys at Fidelity doing?" She asked me look for that myself.
So I started looking for and came across VIX and VXN as fear indices. So I started doing some research on how to use this to my benefit. So I studied this in little more detail and saw the usual range is 15 to 45. I was also using my Moving averages chart and I found amazingly that when VIX crossed 150 day MA, the market went into correction.
Since then I have been collecting that data and plotting 150day MA by myself to get my perspective on the market. This thing has saved me a whole lot of money.
The first wave of 2008, I completely survived but when VIX was at 45-50 level, I started treading into the market to get my head handed back to me. So I learnt the lesson, that one should not tread the shark infested water till VIX comes down below 150 day MA.
Recently, this indicator is having some issues. I think this is due to propagation of weekly options. Since VIX does not account for puts and calls in weeklies, hence its not giving the early warnings. However I believe there will be some adjustments made to this Index. I will keep on monitoring this signal as it might be little late but will still indicate what is going on.
Next article would be how I use Put call ratio in conjunction with VIX to understand the situations
1 comments:
Good article, keep it coming...
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